Miami tells Flagstone to beat it after developer files $122M lawsuit

Flagstone Island Gardens wants a Miami-Dade judge to force the city of Miami to extend a temporary certificate of occupancy allowing the developer to run its marina on Watson Island, seen here. Emily Michot

Flagstone Island Gardens wants a Miami-Dade judge to force the city of Miami to extend a temporary certificate of occupancy allowing the developer to run its marina on Watson Island, seen here. Emily Michot

Following a stunning Miami City Commission vote declaring Flagstone Island Gardens in default of its agreements to build a resort on publicly owned Watson Island, developer Mehmet Bayraktar has filed a $122 million lawsuit accusing the city of double-crossing its long-time business partner.

The city, in turn, sent a message Monday to the embattled developer: Turn over your keys and get off our property.

“The city of Miami hereby officially demand[s] that Flagstone immediately vacate the property and the easement area and turn over to the City for the City’s possession all of Flagstone’s rights and interest in the property and the easement area,” City Manager Daniel Alfonso wrote in a letter addressed to Bayraktar. “The keys, locks, electronic entrance cards, passes, and their equivalent should be immediately tendered to the City of Miami.”

If Flagstone wants to “peaceably surrender the property” — including a $52 million marina it only just built and opened — it ought to contact the city’s real estate director to ensure a smooth transition, Alfonso wrote.

In an eight-count complaint, Flagstone has asked a Miami-Dade judge to void an “invented” declaration by the City Commission that Flagstone defaulted on its master agreement for a resort and retail complex off the MacArthur Causeway. Arguing that it is thecity that has breached the agreements, Flagstone demands that Miami officials not only end their threats, but also approve a modified project design for the resort and issue a final permit allowing for the ongoing use of its marina.

Bayraktar, represented by prominent civil attorney Eugene Stearns, said in his lawsuit that his company has “incurred compensatory damages of more than $122 million in investment.” He said the city’s default notice blew up a pending deal in which Flagstone was poised to sell 95 percent of its development rights to an equity buyer for $185 million.

In a notice sent to Flagstone June 7, the city said the developer missed a deadline to begin construction on a retail and parking portion of its project and also failed to secure a construction loan before securing an upland lease. But Flagstone says those claims are false.

Instead, Bayraktar argues that Miami commissioners, at the urging of Commissioner Ken Russell, reached their default declaration as a result of a political decision — that they’d rather built a transportation hub on Watson Island than the resort first approved by voters back in 2001.

The city commission invented Flagstone’s default as a pretext.

Flagstone Island Gardens complaint vs. City of Miami

“The City Commission, led by Commissioner Russell, changed its mind and decided to tear up its agreements with Flagstone,” states the lawsuit, filed June 9. “The city commission then invented Flagstone’s default as a pretext.”

The details of the lawsuit, first reported by blogger Al Crespo, foreshadow how contentious the dispute is likely to be between the city and Flagstone, which has been trying to build its $1 billion resort for more than 15 years. Bayraktar has blamed 9/11 and the Great Recession for his woes, as well as a series of lawsuits filed by a group of Venetian Island residents who say the developer and city have repeatedly ignored their own laws and charter in pushing the project forward.

Flagstone — held up by some as an example of the city’s poor track record on real estate deals —says it has spent $2 million fighting litigation against the city by the group, which formed a nonprofit called the Coalition Against Causeway Chaos. The coalition, through its attorney Sam Dubbin, has been unsuccessful in challenging the project in court, but convinced commissioners May 30 to declare the developer in default of its agreement.

Flagstone now accuses the city of turning coat, and claims in its lawsuit that coalition member Stephen Herbits is an “undisclosed advisor” to Russell. Herbits, reached for comment, guffawed: “I’m not the only person in this town who cares about the city following the law.”

The commissioner also fired back Monday, taking to Twitter.

“It’s not collusion for more than one person to be on the right side of an argument,” he wrote. “It’s called a consensus of common sense.”

Flagstone is seeking an injunction barring the city from evicting the developer. It is also asking the judge to declare the city in breach of its agreements and liable for damages.

Miami commissioners are expected to vote Thursday to allow City Attorney Victoria Méndez to hire outside counsel to represent the city, whose real estate department argued last month in favor of continuing to work with the developer.